Cross-asset barometers
EU VIX Index (VSTOXX)
Copper / Gold Ratio
EU Peripheral Spread
Cross-Asset Insights
CONCEPT
The dashboard examines key sentiment indicators such as: (1) US & EU VIX which look at equity investor sentiment, (2) copper/gold which looks at the vibe in the commodity market, and (3) peripheral spreads which indicate what's the feeling among bond investors in Europe. Together, they help investors measure investor risk perception, acting as a barometer for the overall market feelings.
CURRENT READINGS
- The EU VIX is currently at 21.1 (LESS EASY) while US VIX stands at 17.3 (TOTALLY RELAXED). The Copper/Gold indicator has turned more optimistic recently and indicates OPTIMISM, while the Italian BTP vs German Bund peripheral government bond spread - at 73.7bps (VERY LOW | CALM) - is at their lowest level in 5 years.
MARKET IMPLICATIONS
In general terms, positive sentiment drives positive asset performance. More in detail, volatility negatively correlates with equities and tends to cluster in regimes. Higher volatility indicates rising tensions for equity investors (fear), while lower volatility indicates optimism or complacency (greed).
Looking at commodities, Copper is driven by global industrial demand, while Gold is a safe-haven asset driven by fear and falling real rates. The ratio between the two acts as a real-time barometer for global growth expectations. A lower ratio indicates that gold prices are rising faster than copper, which is normally (but not always) a sign of investor fear. Viceversa, a higher ratio indicates that copper prices are rising faster than gold, which is normally a sign of investor bullishness.
Finally, the spread between EU peripheral government bonds (Italy/Spain) and German Bunds reflects the perceived sovereign risk in the Eurozone. A widening spread signals economic instability in the block. Viceversa, a tighter spread indicates optimism.